But when you look into how it works, what this new deal illustrates is how much the own/lend paradigm changes when you're talking about digital content.
When the library borrowing feature was first announced for the Kindle months ago, a lot of folks speculated that Amazon would make the Kindle support the ePub format, because Overdrive, the primary supplier of ebooks to libraries, has been selling libraries ebooks in ePub format. When Overdrive assured libraries they would not have to buy new copies of their ebook collection, People assumed that if Overdrive was doing the lending, then the Kindle would revceive an ePub book.
But in fact, that won't happen. What's clear now is that Amazon will send a Kindle-format book once Overdrive notifies them that a Kindle owner has “borrowed” a library book. The library has to own the book, and have a “copy” available to loan, but what actually happens is that Amazon delivers the file just as if the library patron had bought the book, and when the loan period is over, Amazon deletes the book.
Publishers might think this will slow ebook sales, but I don't think it will. The primary advantage of ebooks is convenience, and having only two weeks to read a book is not at all convenient. Also, libraries have been hit hard by the recession, and I don't think they can afford to buy enough copies to make popular books available without a long wait; no one buys a Kindle to wait for a book.
Amazon also makes the idea of the borrower eventually buying the book more appealing by preserving any highlighting or annotations the user made during the lending period. I think this development will first off, increase Kindle sales, and second, push the digital format even further forward.
But first all those Kindle owners will have to find their library cards. I hope I know where mine is!